Daily Traders Edge

Analysts stick by plunging Netflix shares, see comeback this quarter driven by ‘Stranger Things’

July 18
10:55 2019

Wall Street analysts were urging clients to remain calm in the wake of Netflix’s disappointing earnings report.

The company said Wednesday after the bell that it only added 2.7 million global subscribers in the second quarter while Wall Street expected the number to be closer to 5 million. It also reported an unexpected loss in U.S. subscribers.

Shares of Netflix were down more than 10% to $323.24 in midmorning trading Thursday.

Many analysts are already predicting the streaming giant will bounce back in the third quarter, anchored by its original show, “Stranger Things.”

“Early 3Q trends are strong, led by Stranger Things S3, & we believe churn rates have receded closer to pre-price increase levels,” J.P. Morgan analyst Doug Anmuth said.

Strong content is still going to be the backbone for Netflix driving subscriber growth going forward, analysts say.

“Conversely, in 2H′19, there should be a positive impact from an improving slate and we are, therefore, optimistic about the company’s opportunity to grow subscriber additions y/y in a FY basis,” said Piper Jaffray’s Michael Olson.

“Some will say this miss suggests maturation or lack of pricing power; we see neither. We would note Netflix misses have been followed by strong qtrs, and, along those lines, we expect Netflix’s very strong 2H slate will lead to a rebound in sub growth,” Credit Suisse analysts said.

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